Athens’ budget blues

Bureaucratic bungling is threatening the country’s austerity drive
Jane Switzer
Aristidis Vafeiadakis/Zuma/Keystone Press

While struggling to reduce its massive national debt, Greece discovered long-dead pensioners have been continuing to receive retirement payments. Deputy Labour Minister George Koutroumanis announced last week that with the help of police, the government discovered that 321 of the people listed as being over 100 years old, to whom it pays pensions, had died.

Koutroumanis described the situation as a “Third World phenomenon” at a news conference, and outlined the inefficiency of the system that led to the “profligacy and theft” of fraudulent pension payments every year. “One pension, for example, was paid to someone who had died in 1999,” he said, adding that authorities are now compiling a pensioner registry and will prosecute fraudsters. The country’s unreliable account-keeping is also believed to have wasted funds on fake jobs, forged health prescriptions and fraudulent government spending.

The revelation comes during a period of economic upheaval for Greece as it seeks to drastically trim its deficit. In January, Prime Minister George Papandreou’s government rolled out the Stability and Growth Program, aiming to cut the deficit from 12.7 per cent of the GDP in 2009 to 2.8 per cent in 2012, in return for a 110-billion-euro bailout from the European Union and International Monetary Fund. In May, Papandreou announced an unpopular fourth round of austerity measures, which included more public sector pay cuts, trimming pensions, creating new taxes on company profits and an increase on luxury taxes.

But the debt-choked country continues to face a long road to recovery, paved with public ire at the drastic changes. Earlier this year, a nationwide general strike and demonstrations in Athens protesting the new measures turned violent as an estimated 100,000 people marched through the streets. Three bank workers were killed when vandals threw a Molotov cocktail at a Marfin Bank branch, and the protests resulted in dozens of injuries and more than 100 arrests.

And still the bad news continues. The Athens-based Hellenic Statistical Authority reported last week that in the second quarter of 2010, Greece’s gross domestic product shrank 1.8 per cent from the first quarter, down 3.7 per cent from a year earlier. The country’s inflation rate stood at 5.5 per cent in August, a 13-year high the government says is due to providers of goods and services passing on increases in taxes to consumers. The prices of cigarettes and alcohol showed the greatest increase at 16.9 per cent compared to August 2009, the statistics agency said.

With Greece still at risk to default and widespread voter dissatisfaction on the rise, Papandreou executed a late-night cabinet shuffle on Sept. 7 aimed at moving the country forward during its second year in a recession. He replaced his development, labour and health ministers to deal with problems in the social security and health sectors, while keeping George Papaconstantinou in the key post of finance minister.

But a poll conducted by MRB Hellas SA on the eve of the shuffle indicated the change might not be enough to pacify voters before local elections in November, with 67 per cent of respondents saying they think Greece’s economy won’t improve, and 69 per cent saying government policies aren’t laying the ground for growth. “Some members of the government are paying for the government maintaining the same policies,” opposition spokesman Panos Panagiotopoulos told Bloomberg. “However, Greece and the Greeks will continue to pay for these policies.”